We’ve written before about the lengthening tail on the Canterbury New Zealand earthquake loss from 2010/11, as the event demonstrates that quakes are not always a short-tail catastrophe loss. Latest commentary from local insurers suggests this tail continues to lengthen.
The total insurance claims loss neared $19 billion at the end of September 2016, as commercial and residential claims settlement accelerated. However 6% of residential claims and 5% of commercial remained open and these, it seems, are the difficult ones.
Primary insurers have revealed in their results this morning that concerns remain about the potential for the loss to continue to rise, with over-cap claims still emerging from the EQC and issues arising around disputes over claims as well.
All of this suggests that any reinsurance layers which have not yet been commuted could continue to suffer some further impacts, as primary insurer losses from the New Zealand earthquakes rise again.
Tower Group said in a trading update that; “Canterbury continues to present a complex and difficult situation for all insurers, claims costs continue to develop caused by additional ‘overcap’ claims being received from EQC and growth in the level of litigation and customer disputes.”
Suncorp said that “new” over-cap claims from the EQC had added an NZ$18 million whole to its results, this morning, no doubt adding to recent loss provisions from the event which it had said last month would fall to its reinsurance coverage.
Other insurers, including giant IAG, had also added to loss estimates for the Canterbury quake in the second-half of 2016.
The uncertainty associated with Canterbury earthquake claims perhaps casts a shadow over the developing loss from the 2016 Kaikoura earthquake in New Zealand, as it looks like that could also be a drawn out affair.
Issues surrounding business interruption continue to be a major source of uncertainty in the eventual insurance and reinsurance loss from Kaikoura, further underscoring the potential for earthquake loss events to develop slowly.
The fact that insurance-linked securities (ILS) funds and collateralised retrocessionaires exposed to the events in Canterbury largely sought to commute their exposures early on look increasingly prescient.